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Ac 504 Case Study 3

Case Study 3, Part II. Nataliia Dushkevych
2. The three sections of a Cash Budget were included are:
- Cash Flow from Operating Activities;
- Cash Flow from Investing Activities;
- Cash Flow from Financing Activities. 3. There are several reasons why Cash Budget is so vital to the company. The purpose of statement of cash flow is to report cash receipts and cash payouts during a period. This includes separately identifying the cash flows related to operating, investing and financing activities. Information in this statement helps users how to obtain its cash, where does a company spend its cash and explains the change in the cash balance. Information about cash flow helps users decide whether a company has enough cash to pay its existing debts as they mature. External users want to assess a company’s ability to take advantage of new business opportunities. Internal users use cash flow to plan day-to-day operating activities and make long-term investment decisions. 4. There are five basic principles of cash management that a company can flow in order to improve its chances of having adequate cash. They are: 1. Increase of receivable of collections. The more customers pay the more quickly company can use their funds to run the business or invest. 2. Keep inventory levels low. Inventory is costly to keep and storage in warehouses. Company needs to use techniques to reduce the inventory on hand thus conserving their cash. 3. Monitor payment of liabilities. Company needs to keep track of bills due and do not pay them early as well. The company needs also to take a discount on earlier pay bill and save some money. 4. Plan the timing of major expenditures. To make business grow company needs to make major expenditures. This procedure often requires help form outside investing. The company has to carefully consider the timing in operating cycle. 5. Invest idle cash. Cash on hands earns nothing. It’s important that company invests any excess...

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CaseStudy 2-Internal Controls
2014
ACCT 504
Table of Contents
I) Introduction
II) Internal Control Requirements-Sarbanes/Oxley Act
III) Internal Controls-Strengths
IV) Internal Controls-Opportunities for Improvement
Introduction
It has come to the attention of the president of LJB Company that an evaluation is needed to determine the reliability and level of compliance of the company’s internal controls. It is imperative if the company is going public that it follow the regulations set forth by governing bodies. The punishment for violation of these regulations can be up to 20 years in prison.
The Sarbanes-Oxley Act of 2002 helps to ensure that shareholder investments and the general public are protected from fraudulent practices within accounting. According to SOX there are five components:
1) Assessment of Internal Control- An internal control report must be included in the company’s annual report.
2) No Altering of Financial Documents- If anyone falsifies or alters financial documents they are subject to criminal penalties that includes up to 20 year in prison.
3) Must Disclose Periodic Reports- Financial statements are required to be accurate as any items off-balance could be used in a fraudulent manner.
4) Data in a timely manner-...

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Internal Controls:
Requirements and Recommendations
for LJB Company
Prepared For: LJB President
Prepared By:
February 5, 2013
Table of Contents
Introduction……………………………………..…………………………………………3
Internal Control Requirements for Publicly Traded Companies……………………...…..3
Current Strengths in Internal Controls……………………………...……………………..4
Current Weaknesses in Internal Controls…………………………………………………6
Summary and Conclusion……………………………………………………………........8
Bibliography……………………………………………………………………………..10
Introduction
LJB Company inquired about new internal control regulations required if they choose to go public. This report will discuss the regulations required by the Sarbanes-Oxley Act of 2002 that address the internal control measures required by publicly traded companies. This report will also comment on the internal controls currently being performed well at LJB Company and provide a recommendation regarding the purchase of an indelible ink machine. The report will conclude with observations of current weaknesses in internal controls and recommendations for improvement.
Internal Control Requirements for Publicly Traded Companies
Publicly traded companies in the United States are required to follow rules set forth by the Sarbanes-Oxley Act of 2002. The Sarbanes-Oxley Act requires companies “to maintain an adequate system of internal control” (Kimmel,...

...should be updated regularly. (Harrison, Jr., Horngren, & (Bill)Thomas, 2013)
Correct Practices:
1.) Storing checks in a safe at the end of the day is a good practice. This ensures physical control in safeguarding the checks when they may be susceptible to theft.
2.) Using pre-numbered checks is an effective practice to account for them in sequence and track payouts. This can be part of the monitoring system.
3.) I would also recommend the purchase of indelible ink machine. Indelible ink is another way of physical control. If checks issued are printed with indelible ink fraud can be prevented.
Incorrect Practices:
1.) Leaving checks in the accountants’ office is not a good practice it is a violation of physical control. Checks should be secured at all times until they are distributed. I suggest requiring all employees to receive paychecks through direct deposit.
2.) Giving your accountant the responsibility of treasurer and controller is in violation of the segregation of duties in the internal control. I suggest splitting the two roles between two employees.
3.) Leaving petty cash in a drawer and the use of an “IOU” system is not a good physical control of this asset. There is no way to determine whether the funds are being stolen or mismanaged. It is operating solely by honor system, which leaves fund vulnerable to theft. Petty cash should be locked in the safe when not in use and being disbursed. Create a separate ledger and...

...had a significant impact on the company was how they managed their distribution channels. Prior to the divestiture they sold their services through their 22 local telephone subsidiaries, the company would now be spun off into seven independent regional corporations; NYNEX, (N.Y. Telephone and New England Telephone), Bell Atlantic (N.J. Bell, Bell of Pennsylvania, Diamond State Telephone and four Chesapeake and Potomac Telephone Companies), Bell South (South Central Bell and Southern Bell), Ameritech (Indiana Bell, Michigan Bell, Illinois Bell, Wisconsin Bell and Ohio Bell), U.S. West (Mountain Bell, Pacific Northwest Bell and Northwestern Bell), Southwestern Bell (Southwestern Bell) and Pacific Telesis (Pacific Telephone, Nevada Bell).
3. Historical Financial Policy
AT&T’s overall financial policy, including target debt ratio and interest coverage, was designed to maintain an AAA bond rating, which allowed them to reduce borrowing cost and in addition make sure that funds were available in periods of severe financial dislocation.
The dividend policy was relatively conservative for a utility with a target payout ratio of 60% and an actual payout of 58-67%. Their low payout ratio was determined by AT&T’s large capital requirements and the desire to provide some protection for maintaining the stability of dividends. Stockholders reinvested approximately one third of the dividends. Due to the increased competition and the volatile regulatory climate, AT&T...